Successful Venture

Technology-based economic-development effort delivers results, Illinois says.

by / September 5, 2002
Illinois VentureTech, one of the nation's most ambitious technology-based economic development programs, is beginning to pay off, according to state officials.
Launched in 2000, the five-year program will plow $2 billion in state resources into education, research and development, health sciences and biotechnology, and information technology programs.

Illinois now is reaping a return on those investments in the form of top rankings in technology-related surveys, growing activity in business incubator facilities designed to nurture start-up science and technology companies, and increasing commercialization of ideas spawned in the state's research universities.

Illinois' chief technology officer Mary Barber Reynolds said VentureTech is changing how companies - particularly science and technology firms - view the state. Among other things, the broad-ranging initiative earmarks $650 million for government IT projects and directs another $800 million toward education and research-and-development initiatives.
"The Illinois business community is very enthusiastic, which wasn't the case a few years ago," she said. "They didn't see investment. When they see investment, they make additional investment."

The initiative pumped resources into government IT programs such as the Illinois Century Network, which connects more than 5,600 government agencies, universities, colleges, schools, libraries and museums. It also helped Illinois launch one of the nation's first statewide implementations of public key infrastructure (PKI) technology, designed to allow citizens, businesses and others to securely deal with government agencies over the Web.

Those projects and others propelled Illinois into a first-place tie in the 2001 Digital State survey conducted by the Center for Digital Government, the knowledge-management and research division of e.Republic. The annual poll ranks all 50 states on their use of technology to improve government services. By contrast, Illinois finished next to last in the 1998 Digital State survey.

Furthermore, Illinois now leads the nation in the number of high-technology jobs, according to a University of Minnesota study. And it's the country's second-best market for information technology jobs, according to Computerworld magazine.

"From my perspective, that's recognition that the state is moving in the right direction," said Reynolds. "It's simply an outside view that the state is making some strategic investments in the right place."

Commercializing Research
VentureTech is having a similar impact at Illinois research universities, said David Chicoine, vice president of economic development for the University of Illinois. For example, technology-licensing revenue - an indicator of how effectively research is being turned into marketable products - is growing at a 20-percent clip throughout the university system.

Over the past two years, the University of Illinois revamped its technology management processes in an effort to put more research into the hands of established and start-up technology companies. Furthermore, the university is working more closely with Northwestern University and the University of Chicago to expose new research to companies and investors interested in commercializing it.

"We don't nearly have the technology-based growth in the Midwest, even though we've got the horsepower with the public and private universities. It's just that other elements have not been brought together like we've seen on the coasts," said Chicoine. "Now, people are thinking differently about that. We now have people looking to us as a source of technologies for commercialization, and they're looking to us aggressively."

The university also is attempting to direct more technology licenses to local companies. "We've taken an 'Illinois first' licensing approach," he said. "We want to make sure all of the Illinois companies are connected with us and we're connected with them, so they have full information about the technologies that are potentially licensable from our campus."

While licensing changes deliver immediate gains, Chicoine expects VentureTech's investments in research facilities to generate long-term benefits. For example, the initiative is funding development of the Rare Isotope Accelerator Science Center at Illinois' Argonne National Laboratory and the Center for Nanofabrication and Molecular Self-Assembly at Northwestern University.

VentureTech has not only directed more money toward university research facilities, it also has made them easier to approve and construct. These facilities no longer follow the standard higher education capital process; therefore, they don't compete for funding with classroom facilities and other school projects.

"We haven't seen the impact of that bricks-and-mortar investment yet, other than it's certainly been helpful to recruit faculty," Chicoine said. "It's going to be three to five years down the road when that sort of capital comes on line and you really see the impact of it on companies that are commercializing technologies."

Long-term Results
The jury's still out on the ultimate effectiveness of technology-based economic development initiatives, said Philip Psilos, director of economic and technology policy studies for the National Governors Association.

Results of economic development programs fundamentally are difficult to measure due to the wide number of uncontrolled variables that influence a region's economy, he said. VentureTech also focuses on fields such as biotechnology with notoriously long lead times for commercializing intellectual capital. Therefore, it's a mistake to expect overnight benefits, said Psilos and others.

"We're in the midst of a fundamental change in the economy, where knowledge and human skill has been put center stage. It takes time to seed that into a region," he said. "Illinois is a high human-capital state, but policies to turn that into economic growth are an effort that will be rewarded in the long term."

Still, VentureTech has become a model for government efforts to nurture New Economy jobs and investment since its launch two years ago.

"None of the pieces of VentureTech policy were particularly unique or pioneering. It was the combination that was unusually comprehensive," Psilos said. "I think what has led a lot of states to try to replicate VentureTech is its multi-pronged approach, including investment in fundamental research and also its sophisticated, cluster-based orientation. It's building on existing strengths and supplementing them to move to the next-generation technologies."

A Better Way
Programs such as VentureTech represent enlightened thinking on economic development, according to Rob Atkinson, director of the Technology & New Economy Project at the Washington, D.C.-based Progressive Policy Institute.

"What states like Illinois are looking at is how to develop a more entrepreneurial and technology-based economy," he said. And tax breaks and other traditional economic development incentives don't necessarily stimulate growth in those areas.

"Smokestack-chasing, whether it's a steel mill or a chip plant, is still a bad idea," Atkinson said. "Just willy-nilly going out there and trying to get more companies to come to your state, that might even hurt your budget if you're giving away a lot of incentives and you're only gaining medium- or low-wage jobs."

Instead, a comprehensive strategy for investing in IT infrastructure, education and advanced research and development is key to attracting high-paying, knowledge-based industries, he said. And universities play a key role in that effort.

"The tendency in most states has been to keep the university governance completely separate from the economic development governance," Atkinson said. "So you boost your English literature department at the same rate you boost your wireless engineering department. If you're going to think seriously about tying your university system to economic development, you need to be strategic about where you intervene."

Multi-pronged economic development initiatives are particularly important for Midwestern states, which have lagged behind high-tech centers on the nation's east and west coasts, added Atkinson.

"They have been able to build much more entrepreneurial technology-based and knowledge-based economies, so I think some of the Midwestern states have recognized that and are saying, 'We need to do something about it.'"

Picking Up Speed
That's certainly the case in Illinois, where VentureTech's broad range of IT and research-and-development investments are gathering momentum.

"The more we talk to business groups about some of the things that we have in the works with improvements to our business portal and improvements in the way that they can do business in Illinois, they are realizing that a state that's making these investments is a good place to do business," said Reynolds.

Now, however, she faces the task of ensuring that VentureTech remains viable despite Illinois' current economic climate and the departure of its creator, Gov. George Ryan.

At press time, Reynolds expected VentureTech to escape the current state budget crunch relatively unscathed. "It's very much intact, and we're very much on schedule," she said. "There are very few areas that are proposed to be cut - I can literally count them on one hand."

Meanwhile, Ryan, who considers VentureTech a key part of his administration's legacy, will leave office in January. Therefore, Reynolds is taking steps to make certain the program lives on. "My goal in this election is to educate both gubernatorial candidates so they understand [VentureTech's] success and the need to keep it going."